1BDC CPA REVIEW INSTITUTE

O SQUARE ACCOUNTING SERVICES

3/F Fuentes Bldg., Marasbaras, Tacloban City

Mobile No.: 0927-981-6331; 0919-340-7505
E-mail: dargelaluser@gmail.com

HO & BRANCH ACCOUNTING

Problem 1
Ilocos Corporation has been operating a branch in Surigao for a year. Shipments are billed to the branch at cost. The
branch carries its own accounts receivable, makes its own cash collections, and pays its own expenses. The transactions
of the branch for the year 2008 are given effect in the trial balance below:
Debits Credits
Cash P200,000
Home Office Current P400,000
Shipments from Home Office 1,600,000
Accounts Receivable 300,000
Sales 1,940,000
Expenses 240,000 -0-
Totals 2,340,000 2,340,000
The branch inventory on December 31, 2008 is P260,000.

Determine:
1. On January 1, 2009, the Shipment to Branch Account on the Home Office books should have an opening balance
of:
a. -0- c. 360,000
b. 1,960,000 d. 2,000,000

2. On December 31, 2008, compute the net income of the branch:

a. 1,700,000 c. 1,400,000
b. 360,000 d. 100,000

3. On January 1, 2009, the Branch Current account on the books of the Home Office should have a balance of:
a. 760,000 c. 2,160,000
b. 1,000,000 d. 400,000

Problem 2
On January 1, 2009, the branch manager of Marylyne Company in Marikina City submitted the following data to the
home office:
Petty Cash Fund 10,000
Sales 564,000
Sales return 4,000
Accounts written-off 10,000
Shipments from home office 300,000
Accounts receivable, January 1, 2008 90,000
Accounts receivable, December 31, 2008 100,000
Inventory, January 1, 2008 60,000
Inventory, December 31, 2008 70,000
Expenses (charged by Home Office) 120,000

All cash collected on accounts receivable are remitted to the Home Office.

Determine:
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 1. The balance of the Home Office Current Account on January 1, 2008 is:
a. -0- c. 180,000
b. 160,000 d. 300,000

2. The net income of the Marikina Branch for the year ending December 31, 2008 is:
a. 140,000 c. 150,000
b. 144,000 d. 270,000

3. The total remittance for the year 2008 is:

a. 540,000 c. 550,000
b. 544,000 d. 560,000

4. On December 31, 2008, the Branch Current Account on the Home Office books is:
a. -0- c. 180,000
b. 160,000 d. 300,000

Problem 3
The following entries are reflected in the intra-company accounts of a home office and its lone branch for June 2008:
Investment in Branch
6/01 Balance P50,000 6/02 Remittance P10,000
6/12 Inventory Shipment 12,000 6/08 Collection of branch
6/25 Advertising allocation to Receivable 500
Branch (50% of advertising 6/27 Equipment purchase by
Incurred) 4,000 Branch 7,000
6/28 Inventory Shipment 14,000
6/30 Depreciation allocation 2,000
6/30 Balance P64,500

Home Office Current

6/02 Remittance P10,000 6/01 Balance P50,000
6/24 Purchase of equipment 6/10 Collection of home office
Carried on home office Receivable 2,000
Books) 7,000 6/16 Inventory Shipment 12,000
6/29 Remittance 15,000 6/28 Advertising allocation 400
6/30 Inventory returned to
Home Office 1,000
6/30 Depreciation allocation 2,000
6/30 Balance P29,400

Except for the error by the branch in recording its share of allocated advertising expense and depreciation allocation, all
differences are timing differences.

Compute the adjusted balance of the reciprocal account on June 30, 2008:
a. 46,900 c. 50,500
b. 48,500 d. 51,000

Problem 4
On December 31, 2008, the Branch Current ledger account in the accounting records of the home office of Grace
Company shoes a debit balance of P55,500. You ascertained the following facts in analyzing this account:
a. On December 31, 2008, merchandise billed at P5,800 was in transit from the home office to the branch. The
periodic inventory system is used by both the home office and the branch.
b. The branch had collected home office trade accounts receivable of P560; the home office was not notified.
c. On December 29, 2008, the home office has mailed a check for P2,000 to the branch, but the accountant for the
home office had recorded the check as a debit to the Charitable Contribution Expense ledger account; the
branch had not received the checks as of December 31, 2008.
d. Branch net income for December 2008, was recorded erroneously by the home office at P840 instead of P480.
The credit was recorded by the home office in the Branch Income Summary ledger account.
e. On December 28, 2008, the branch had return supplies costing P220 to the home office; the home office had not
recorded the receipt of the supplies. The home office records acquisitions of supplies in the Office supplies
ledger account.
f. Acquisition of equipment by the branch, P1,500. The equipment account is to be maintained in the home office
books. The home office had not been notified of the acquisition.

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 g. A branch customer erroneously remitted P1,000 to the home office. The home office recorded this cash
collection on December 29, 2008. Meanwhile, back at the branch, no entry has been made yet.

Determine:
1. The balance of the home office current account on the books of the branch as of December 31, 2008 before its
adjustment.
a. 53,180 c. 49,180
b. 51,180 d. 48,620

2. The adjusted balance of the reciprocal account on December 31, 2008.

a. 50,180 c. 55,980
b. 54,480 d. 56,980

Problem 5
Laker trading Company operates a branch in Dagupan City. At close of business on December 31, 2008. Dagupan Branch
account in the home office books showed a debit balance of P225,770. The interoffice accounts were in agreement at
the beginning of the year. For purposes of reconciling the interoffice accounts, the following facts were ascertained:
1. An office equipment costing the home office P3,500 was picked up by the branch as P350.
2. Insurance premium of P675 charged by the home office was taken up twice by the branch.
3. Freight charge on merchandise made by the home office for P1,125 was recorded in the branch books as P1,215.
4. Home office credit memo representing a discount on merchandise for P800 was not recorded by the branch.
5. The branch failed to take up a P700 debit memo from the home office representing the share of the branch in
advertising.
6. The home office inadvertently recorded a remittance for P3,000 from its Cebu branch as a remittance from its
Dagupan branch.

Compute the balance as of December 31, 2008:

Unadjusted Balance of the Adjusted balance
Home Office Current of the Reciprocal account
a. P226,485 P225,770
b. 228,485 228,770
c. 225,770 226,485
d. 226,485 228,770

Problem 6
The Sharon Company operates a branch in Marawi City. Operating data for the home office and the branch for 2008
follow:
Home Office Branch
Sales P256,000 P 78,500
Purchases from outsiders 210,000 20,000
Shipments to branch:
Cost to home office 30,000
Billing price to branch 40,000
Expenses 60,000 12,500
Inventories, January 1, 2008
Home Office acquired from outsiders, at cost 80,000
Branch:
Acquired from outsiders, at cost 7,500
Acquired from home office, at billed price, which
Average 22 ½ above cost 24,500
Inventories, December 31, 2008
Home Office, acquired from outsiders, at cost 55,000
Branch:
Acquired from outsiders, at cost 5,500
Acquired from home office, at 2008 billed price 26,000

1. The branch inventory at cost:

1/01/2008 12/31/2008
a. P32,000 P31,500
b. 26,488 22,833
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 c. 27,500 26,724
d. 27,500 25,000
2. The combined net income (loss) of the home office and the branch for the year 2008 amounted to:
a. (3,500) c. (5,224)
b. 2,776 d. 4,500

Problem 7
YY Corporation has two branches to which merchandise is transferred at cost plus 20%, plus freight charges. On
November 30, 2006, YY Corporation shipped merchandise that cost P5,500 to its CC Branch, and the P200 shipping
charges were paid by YY Corporation. On December 15, 2006, the DD branch encountered an inventory shortage, and
the CC branch shipped the merchandise to the DD branch at a freight cost of P160 paid by the CC branch. Shipping
charges from the home office to the DD branch would have been P175.
1. YY corporation will record the P5,500 shipment to the CC branch, together with the P200 shipping charge, in a
journal entry that includes the following:
a. Shipment from home office, P6,600.
b. Shipment to CC branch, P5,700.
c. Unrealized profit- branch inventory, P1,100.
d. Investment in CC Branch, P5,700.
2. CC branch should record the transfer of merchandise to the DD branch by either a debit or credit entry that
includes the following:
a. Shipments from home office, P5,500
b. DD branch, P6,975
c. Home Office, P6,960.
d. Inventory, P5,660.
3. If the merchandise is unsold at year-end, the DD branch will inventory the merchandise at:
a. 6,000 c. 6,760
b. 6,975 d. 6,775
4. If the merchandise is unsold at year-end, YY Corporation will include it as an asset in its Annual Report to
Stockholders in the amount of:
a. 5,500 c. 5,675
b. 5,660 d. 5,875
5. The loss on excessive freight charges on the inter-branch transfer amounted to:
a. 200 c. 175
b. 160 d. 185

JOINT VENTURE

1. The following joint venture account reflects the transactions of the venture of A, B and C as recorded by each
Venturer (participant)
Joint Venture
2004
Nov.5 Merchandise – C P12,750 Nov.18 Cash sales P30,600
17 Merchandise – B 10,500 Dec. 12 Cash sales-A 6,300
22 Freight-in-A 525 28 Merchandise –B 1,815
Dec. 3 Purchase –A 5,250
13 Selling Exp. –A 600

Distributions of gains or losses are to be trade as follows: A – 50%; B – 30%; and C – 20%. The venture is to close
on December 31, 2004:

The joint venture profit (loss) is:

a. 7,275 c. 25,980
b. 9,090 d. 29,625

2. Using the same information in No.1, how much of each venture (participant) receive in the final settlement?
a. A – none; B – P11,412; C – P14,568
b. A – P4,545; B – P11,212; C – P10,932
c. A – P5,070; B – P11,212; C – P10,932
d. A – P4,545; B – P11,412; C – P14,568

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 3. On July 1, 2008, Rey, Fretz and Gerald formed a joint venture for the sale of merchandise. Rey was designated as
the managing participant. Profits or losses are to be divided as follows: Rey, 50%; Fretz, 25%; and Gerald, 25%.
On October 1, 2008, though the joint venture is still uncompleted, the participants agreed to recognize profit or
loss on the venture to date. The cost of inventory on hand is determined at P25,000. The Joint Venture account
has a debit balance of P15,000 before distribution of profit and loss. No separate set of books is maintained for
the joint venture and the participants record in their individual books all venture transactions.

The joint venture profit (loss) on October 1, 2008 is:

a. P10,000 c. P(15,000)
b. P25,000 d. None

4. Using the same information in No.3 and the joint venture account has a credit balance of P30,000, the joint
venture profit (loss) is:
a. P(55,000) c. P(5,000)
b. P55,000 d. P5,000

5. MM and DD agreed on a joint venture to purchase and sell car accessories. They agreed to contribute P25,000
each to be used in purchasing the merchandise, share equally in any gain or loss, and record their venture
transactions in their individual books. After one year, they decided to terminate the venture, and data from their
records were:

Joint venture account credit balances: in books of MM, P18,000; in books of DD, P20,200, Cost of car accessories
taken: by MM, P1,000; by DD, P1,800, Expenses paid: by MM, P1,850; by DD, P2,600.

How much was the joint venture’s sales?

a. P83,750 c. P91,000
b. P86,550 d. P92,650

6. Reyes, Tacandong and Sycip formed a joint venture. Reyes was designated as the manager and was to record the
joint venture’s transactions in his own books. As manager, Reyes was to be allowed a salary of P12,000; the
remaining profit or loss was to be divided equally.
The following balances appeared at the end of 2008, before adjustment for venture inventory and profit:
Debit Credit
Joint venture cash P48,000 P -0-
Joint venture -0- 15,000
Tacandong, capital 1,000 -0-
Sycip, capital -0- 27,000

The venture was terminated on December 31, 2008 and unsold merchandise costing P10,500 were taken over
by Sycip. Reyes made cash settlement with Tacandong and Sycip.

In the final settlement, how much did Sycip receive?

a. P31,500 c. P21,000
b. 27,000 d. 10,500

7. Punongbayan, Araulio and Isla formed a joint venture to purchase a piece of lot and to erect an apartment
building for sale. Punongbayan is to manage the venture hence, he will receive a bonus of 10% of the venture’
gain before deducting the bonus as an expense. Any remaining gain or loss is to be divided equally among the
participants. The venture is completed on August 31, 2008. On this date, the accounts of Punongbayan and Isla
show the following balances:
Books of
MM NN
Account with Punongbayan P16,000 Cr. P16,000 Cr.
Account with Araulio 32,000 Cr.
Account with Isla 18,000 Dr.

There are unused construction supplies which Punongbayan agreed to take over at its cost of
P42,000.

Final settlement with the venturers will require payments as follows:

a. Punongbayan pays Isla P11,200, and Araulio pays Isla P14,000
b. Punongbayan pays Isla P25,600, and Araulio P14,400

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 c. Punongbayan pays Araulio P14,400, and Isla pays Punongbayan P30,800.
d. Punongbayan pays Araulio P35,600, and Isla pays Punongbayan P14,400

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